Intel Shares Plunge After Gross Margins Disappoint, Delaying 7-Nano Transition

Intel beat top- and bottom-lines in tonight's earnings:

  • Intel 2Q Rev. $19.7B, Est. $18.54B

  • Intel 2Q Adj EPS $1.23, Est. $1.12

Intel CEO Bob Swan proudly celebrated the quarter:

It was an excellent quarter, well above our expectations on the continued strong demand for computing performance to support cloud-delivered services, a work- and learn-at-home environment, and the build-out of 5G networks. In our increasingly digital world, Intel technology is essential to nearly every industry on this planet. We have an incredible opportunity to enrich lives and grow this company with a continued focus on innovation and execution.”

The outlook was solid:

  • Intel Sees FY Adj EPS $4.85, Est. $4.78

  • Intel Sees 3Q Rev. About $18.2B, Est. $17.90B

Except for Q3 earnings:

  • Sees 3Q adjusted EPS about $1.10, estimate $1.14 (range 98c to $1.28)

But the devil was in the details as gross margins tumbled from 62% a year ago to 55% (est. 56.3%) and more problematic was the fact that the 7 nanometer chip transition will be delayed and that it is accelerating its 10 nanometer transition.

“The company’s 7nm-based CPU product timing is shifting approximately six months relative to prior expectations. The primary driver is the yield of Intel’s 7nm process, which based on recent data, is now trending approximately twelve months behind the company’s internal target.”

And this sent INTC shares tumbling 8% after hours to its lowest since early April...

Rival AMD is rallying as INTC dives...